Boulder, Colo. is advancing cautiously in its strategic battle to wrest control of the distribution assets owned by Xcel Energy inside of its city limits. Its aim is to generate and transmit mostly green power to its residents.
The lofty goal, though, is more problematic than the Boulder City Council can envision. “Municipalizing” any utility means that a city must calculate the fair value of assets as well as the price of running a system while also ensuring that the service is reliable. To that end, Xcel is saying that Boulder is under-estimating its bills by about $10-$15 million a year.
“We will continue to raise questions about the plan on behalf of our customers,” says David Eves, chief executive officer of Xcel Colorado. “We will also work with a task force of Boulder citizens to create new energy options that will allow Boulder to achieve its energy goals better, faster and cheaper with Xcel Energy than through risky municpalization.”
In November 2011, city residents voted to condemn Xcel’s distribution assets within city limits and to prepare to take over that aspect of the business. The hurdles: agreeing on a price and guaranteeing that the municipal rates would be at least equal to that of the utility.
For its part, the city says that renewable energy would immediately comprise half of its offerings for the same cost that its citizens now pay Xcel. It also says that greenhouse gases would fall by 50 percent under its plan. Boulder’s City Council voted 8 to 1 this past week to hire an independent analyst to review its numbers to see if the city properly calculated all costs.
The most critical decision will come in August, however, when the city must decide if it will issue bonds to pay for the venture. After that point, backing out would be painful and pricey.
“It is important for council, and the community, to understand that making the decision to proceed with condemnation is deciding to municipalize unless the financial requirements outlined in the Charter cannot be met,” say city officials. “To initiate condemnation, council must be ready to form the utility and issue bonds to pay what it offers Xcel …. or what the court determines …”
The utility will undoubtedly dispute the bid. It is also saying that Boulder under-estimates operational expenses by improperly figuring both the cost of wind energy and integrating it onto the grid. The wind power, meantime, must be backed up by natural gas plants that are running at all times. Generation and distribution are large capital expenditures while the engineering, fuel and maintenance all add up.
Xcel emphasizes that it would be a willing partner in the effort to help Boulder achieve its green energy goals, pointing out that for the ninth year running it has been named the top wind energy provider in the country. Better to let the experts run a utility, it implies, than a city that has trouble picking up the trash on time.
Of concern: The independent consultant, who the city will hire to review its analysis, must be chosen by May 26th and their report will be due by July 26th – a time frame that will get truncated because of other requirements, which is not enough time to do a thorough job.
Moreover, the legal process will be both costly and lengthy, says Bob Bellemare, chief operating officer of New Mexico-based Mykrobel, which is advising Xcel. He is hopeful that the working group formed between Xcel and Boulder’s citizens could produce an acceptable result for both sides.
“We would be interested in exploring … a vote that could inform a future Council about the public’s support for the project when the final price tag is known,” adds the Boulder Chamber of Commerce. “That seems consistent with the goal of giving our community a greater voice in decision making.”
Boulder now gets about 11 percent of its electricity from green sources. While Colorado has a 30 percent renewable portfolio standard, the city wants to increase that to 90 percent by 2020. It says that Xcel is reluctant, and would prefer to invest more in combined cycle natural gas plants.
Boulder is inching closer in its quest to acquire Xcel’s distribution assets. It must now check its math before it would take the final plunge and issue bonds to finance the deal. The two sides, though, could still reach an agreement to avert such drastic action. While a more tempered approach, the outcome would give Boulder greater energy independence without jeopardizing the city’s electricity lifeline.